Volkswagen Group of America, Inc. And Audi of America, Inc. v. John Walker III, in His Official Capacity as Chairman of the Texas Department of Motor Vehicles Board The Honorable Michael J. O'Malley, the Honorable Penny A. Wilkov, in Their Official Capacities as Administrative Law Judges for the State Office

ACCEPTED

03-15-00285-CV

5816065

THIRD COURT OF APPEALS

AUSTIN, TEXAS

6/25/2015 8:52:53 AM

JEFFREY D. KYLE

CLERK

NO. 03-15-00285-CV

FILED IN

IN THE THIRD COURT OF APPEALS 3rd COURT OF APPEALS

AUSTIN, TEXAS AUSTIN, TEXAS

6/25/2015 8:52:53 AM

JEFFREY D. KYLE

Clerk

VOLKSWAGEN GROUP OF AMERICA, INC.

AND AUDI OF AMERICA, INC.

Appellants

v.

JOHN WALKER III, IN HIS OFFICIAL CAPACITY AS CHAIRMAN OF

THE TEXAS DEPARTMENT OF MOTOR VEHICLES BOARD, AND THE

HONORABLE MICHAEL J. O’MALLEY AND THE HONORABLE

PENNY A. WILKOV, IN THEIR OFFICIAL CAPACITIES AS

ADMINISTRATIVE LAW JUDGES FOR THE STATE OFFICE OF

ADMINISTRATIVE HEARINGS

Appellees

On Appeal from the 201st Judicial District Court, Travis County, Texas

Trial Court Cause No. D-1-GN-15-001186

Honorable Amy Clark Meachum, Presiding Judge

APPELLANTS VOLKSWAGEN GROUP OF AMERICA, INC. AND AUDI

OF AMERICA, INC.’S SUPPLEMENT TO THEIR VERIFIED MOTION

FOR TEMPORARY RELIEF TO PROTECT THE COURT’S

JURISDICTION

__________________________________________________________________

Appellants file this Supplement to Their Motion for Temporary Order to

Protect the Court’s Jurisdiction and show:

A. INTRODUCTION

1. Appellants are automobile manufacturers Volkswagen Group of

America, Inc. and Audi of America, Inc. (collectively “Audi”).

2. Appellees are three individuals who are sued in their official

capacities, John Walker III, Michael J. O’Malley and Penny A. Wilkov. Walker is

Chair of the Texas Department of Motor Vehicles Board. O’Malley and Wilkov

are Administrative Law Judges for the State Office of Administrative Hearing

(SOAH)1.

3. In this appeal, Audi seeks to overturn the 201st Judicial District

Court’s erroneous grant of Defendants/Appellees’ Pleas to the Jurisdiction and the

resulting dismissal of Audi’s district court lawsuit.

4. Audi has previously filed a motion requesting temporary relief to

protect this Court’s jurisdiction over this appeal and to prevent the issues presented

in this appeal from becoming moot. This supplement brings new information to

the Court which demonstrates that temporary relief is needed to prevent this appeal

from being mooted by actions taken in the underlying contested administrative

case.

B. BACKGROUND

5. As this Court may recall, Audi filed suit in a Travis County district

court to enjoin Appellees from conducting ultra vires acts and remand proceedings

1

The Texas Supreme Court held in City of El Paso v. Heinrich, 284 S.W.3d 366, 368 (Tex. 2009),

that an action to “determine or protect a private party’s rights against a state official who has acted

without legal or statutory authority is not a suit against the State that sovereign immunity bars,” and,

therefore must be brought against the state actor in his or her official capacity since the state and its

subdivisions remain immune. Id. at 373; Southwestern Bell Tel., L.P. v. Emmett, ___ S.W.3d ____, 58

Tex. Sup. Ct. J. 567; 2015 WL 1285326 (Tex. 2015).

2

in an underlying contested administrative case (Contested Case)2 that is pending in

the Texas Department of Motor Vehicles, Motor Vehicle Division (the Board) in

which Budget Leasing Inc. d/b/a Audi North Austin and Audi South Austin

(Budget) and others, protested the manufacturer’s rejection of Budget’s proposed

transfer of two Audi dealerships to a group of investors. CR 117-148 and exhibits

thereto; 367-369. CR.

6. After a full trial before two SOAH Administrative Law Judges,

Appellees O’Malley and Wilkov (the ALJs), the Board dismissed the protest

because Budget had not strictly complied with the protest application provision of

the Texas Occupations Code, therefore, the Board did not enter a decision based on

the PFD proposed by the ALJs. CR 503-505.

7. After the dismissal, Budget and the Intervenors (some of the

prospective transferees)3 filed a motion for rehearing with the Board. The Board

granted rehearing and voted to remand the Contested Case back to SOAH, over

Audi’s objections that, among other things, Chairman Walker did not have the

2

The administrative Contested Case is styled Budget Leasing, Inc. d/b/a Audi North Austin and

Audi South Austin v. Weitz, et. al. v. Volkswagen Group of America, Inc., et. al., MVD Docket No. 13-

0008-LIC, SOAH Docket No. XXX-XX-XXXX.LIC, before the Texas Department of Motor Vehicles, Motor

Vehicle Division (the “Contested Case”).

3

Under the Occupations Code, proposed transferees do not have standing to bring a protest

action—only the existing dealer has standing to protest a manufacturer’s refusal to approve a proper

transfer. Tex. Occ. Code § 2301.360(a) (“A dealer whose application is rejected under Section 2301.359

may file a protest with the board.”); Butnaru v. Ford Motor Company, 84 S.W.3d 198, 206 (Tex. 2002)

(“The Code’s definition of ‘dealer’ includes licensed dealers but not prospective transferees.”)

3

statutory authority to order the remand4 and that the ALJs did not have the

statutory power to conduct the remand or reopen evidence after the issuance of a

PFD.5 The Contested Case was remanded to the ALJs for further proceedings on

an expedited basis.6 Upon receipt of the remand, the ALJs created and

implemented an expedited schedule for the remand. CR 133; CR 152-53; 169; CR

506-526; 152-153.

8. Audi filed this action and requested injunctive relief to, among other

things, prevent Appellees from conducting the ultra vires: 1) remand of the

Contested Case; 2) reopening of evidence after issuance of the PFD; 3) issuance of

a new PFD by the ALJs; and, 4) issuance of a new final decision. See e.g.,

Heinrich, 284 S.W.3d at 369. Dendants/Appellees responded to the suit with Pleas

4

Appellees do not have inherent powers. Instead, as state agency actors, they only have the

powers specifically given to them by the legislature. See e.g., Sexton v. Mount Olivet Cemetery Assn, 720

S.W.2d, 137 (Tex. App.—Austin 1986, writ ref’d n.r.e.). Chairman Walker was not authorized to issue a

remand because remand is not a power listed in § 2001.058(e) of the Administrative Procedure Act.

Further, there are other ultra vires acts that are a part of this appeal. The remand order materially differs

from a board member’s motion, making the order itself ultra vires. CR 7-8, 1898, 1905-06, 1908.

Moreover, the remand is designed to consider “evidence” that was not timely filed despite the fact that the

Code only permits the board members and ALJs to consider “materials that are submitted timely.” Tex.

Occ. Code § 2301.709(a); 2301.154. This “evidence” was not presented for the Board’s consideration

until October 15, 2014 despite the fact that the evidence had closed on May 28, 2014, the ALJs issued a

PFD on July 16, 2014 and the Board issued a Final Order on September 12, 2014. CR 502, 505. In fact,

this “evidence” was not even mentioned in Budget’s operating Motion for Rehearing. See e.g., CR 139.

5

The ALJs are outside their authority because SOAH Rule 155.153 only allows an ALJ to reopen

evidence “if the judge has not issued a dismissal, proposal for decision, or final decision.” Here, the

remand attempts to reopen evidence long after the ALJs issued a PFD. See e.g., CR 140.

6

Not only did the Board’s order request that the ALJs expedite their remand proceedings, but

Chairman Walker also assured counsel for Budget that “as soon as we get this back . . . we will expedite

and move the process along as quickly as possible. You have my word on that.” Ritsema Affidavit

(previously filed in support of Audi’s Motion for Temporary Relief) at ¶ 13.

4

to the Jurisdiction in which they asserted governmental immunity from suit and the

exhaustion of remedies doctrine. CR 821-843.

9. The court below erroneously granted the Defendants/Appellees’ Pleas

to the Jurisdiction allowing Appellees’ ultra vires acts and the remand of the

Contested Case to go forward. CR 2030-31. Audi then filed this appeal and

sought temporary relief to protect this Court’s jurisdiction to decide this dispute.

Since filing its request for temporary relief, an additional action has taken place in

the contested administrative case that increases the need for temporary relief.

C. NEW DEVELOPMENT

10. As mentioned above, the ALJs are using a compressed schedule for

the remand of the Contested Case. In fact, the ALJs conducted the remand

hearing on April 16, 2015 and required post-hearing briefing by May 28, 2015.

CR 133;152-53; 169.

11. In a new development, occurring just days after Audi filed its motion

for temporary relief with this Court, the ALJs closed the evidence in the contested

case on June 16, 2015. Donley Affidavit attached hereto and incorporated herein.

The ALJs’ closure of the evidence makes Audi’s request for temporary relief even

more necessary because, under the Administrative Procedure Act, the ALJs must

issue a PFD within 60 days of the closing of evidence in a hearing. Tex. Gov’t

Code § 2001.143. Since the evidence was closed on June 16, 2015, the ALJs could

5

issue a second, ultra vires, PFD at any time prior to August 15, 2015. As a result,

the Board could enter a Final Decision based on that PFD before this Court can

reach the merits of this appeal, since this Court does not hear arguments during the

Summer and is unlikely to be able to issue an opinion on the merits of this appeal

before Fall. Ritsema Affidavit (previously filed in support of Audi’s Motion for

Temporary Relief) at ¶ 13. T

12. As such, this Court should exercise its power to prevent Appellees

from taking further steps in the administrative remand which would render Audi’s

appeal moot and deprive this Court of jurisdiction over it. See, e.g., Tex. R. App.

P. 29.3; Tex. R. App. P. 43.6; Cobb v. Thurmond, 899 S.W.2d 18, 19 (Tex. App.—

San Antonio 1995, writ denied); Lamar Builders, Inc. v. Guardian Savings & Loan

Association, 786 S.W.2d 789, 790 (Tex. App.—Houston [1st Dist.] 1990, no

writ)7.

WHEREFORE, PREMISES CONSIDERED, Appellants Volkswagen

Group of America, Inc. and Audi of America, Inc. respectfully request that this

Court grant temporary relief preventing Appellees from conducting further remand

7

See also Holloway v. Fifth Court of Appeals, 767 S.W.2d 680, 682-83 (Tex. 1989) (noting that a

superior appellate court has power to issue a writ against an inferior tribunal to prohibit it from interfering

with a pending appeal or enforcement of the appellate court’s orders); In re Lewis, 223 S.W.3d 756, 761

(Tex. App.—Texarkana 2007, orig. proceeding) (“[An order] may issue to . . .prevent interference with

higher courts in deciding a pending appeal . . . .”) (citing Tex. Capital Bank–Westwood v. Johnson, 864

S.W.2d 186, 187 (Tex. App.—Texarkana 1993, orig. proceeding); McClelland v. Partida, 818 S.W.2d

453, 456 (Tex. App.—Corpus Christi 1991, orig. proceeding)); In re Shields, 190 S.W.3d 717, 719 (Tex.

App.—Dallas 2005, no pet.) (citing Dallas Morning News v. Fifth Court of Appeals, 842 S.W.2d 655, 657

(Tex. 1992)) (“A court of appeals may issue such a writ to prevent an appeal from becoming moot.”)

6

proceedings in the Contested Case, from issuing a PFD based on the remand, and

from entertaining, issuing, signing or entering a Final Decision based on the

remand until this Court rules on the merits of Audi’s appeal. Audi also requests

such other and further relief, both general and specific, at law and in equity, to

which it may be entitled.

Respectfully submitted,

KING & SPALDING LLP

By: /s/ S. Shawn Stephens

S. Shawn Stephens

Texas Bar No. 19160060

sstephens@kslaw.com

James P. Sullivan

Texas Bar No. 24070702

jsullivan@kslaw.com

1100 Louisiana, Suite 4000

Houston, Texas 77002

Telephone: (713) 751-3200

Facsimile: (713) 751-3290

Billy M. Donley

Texas Bar No. 05977085

Mark E. Smith

Texas Bar No. 24070639

BAKER & HOSTETLER LLP

811 Main Street, Suite 1100

Houston, Texas 77002

Telephone: (713) 751-1600

Facsimile: (713) 751-1717

Attorneys for Appellants

Volkswagen Group of America, Inc.

and Audi of America, Inc.

7

CERTIFICATE OF CONFERENCE

As required by TEX. R. APP. P. 10.1, I conferred counsel for Appellees on

the merits of Appellants’ Supplement to Their Verified Motion for Temporary

Relief to Protect the Court’s Jurisdiction. Dennis McKinney, counsel for Appellee

John Walker III, is now opposed. Kimberly Fuchs, Counsel for Appellees Michael

J. O’Malley and Penn A. Wilkov, is opposed. Dent M. Morton, counsel for

Appellees Ricardo M. Weitz; Hi Tech Imports North, LLC; Hi Tech Imports,

South, LLC; and Hi Tech Imports, LLC, is opposed. Therefore, I assume that they

are all opposed to this supplement to the motion.

/s/ S. Shawn Stephens

S. Shawn Stephens

CERTIFICATE OF SERVICE

I certify that on June 25, 2015, I used the Court’s electronic case filing

system to file this Motion for Temporary Order to Protect the Court’s Jurisdiction

and to serve this document on counsel for appellees as follows:

William R. Crocker Kimberly Fuchs

crockerlaw@earthlink.net kimberly.fuchs@texasattorneygeneral.gov

807 Brazos, Ste. 1014 Assistant Attorney General

Austin, Texas 78701 Texas Attorney General’s Office

P.O. Box 12548

Counsel for Appellees Ricardo M. Austin, Texas 78711-2548

Weitz; Hi Tech Imports North, LLC;

Hi Tech Imports, South, LLC; and Counsel for Appellees Michael J. O’Malley

Hi Tech Imports, LLC and Penny A. Wilkov

8

J. Bruce Bennett Dennis McKinney

jbb.chblaw@sbcglobal.net dennis.mckinney@texasattorneygeneral.gov

Cardwell, Hart & Bennett, LLP Assistant Attorney General

807 Brazos, Suite 1001 Texas Attorney General’s Office

Austin, Texas 78701 P.O. Box 12548

Austin, Texas 78711-2548

Counsel for Appellees Ricardo M.

Weitz; Hi Tech Imports North, LLC; Counsel for Appellee John Walker III

Hi Tech Imports, South, LLC; and

Hi Tech Imports, LLC

Joseph W. Letzer

jletzer@burr.com

Dent M. Morton

dmorton@burr.com

Burr & Forman, LLP

420 20th Street N., Suite 3400

Birmingham, AL 35203

Counsel for Appellees Ricardo M.

Weitz; Hi Tech Imports North, LLC;

Hi Tech Imports, South, LLC; and

Hi Tech Imports, LLC

/s/ S. Shawn Stephens

S. Shawn Stephens

9

NO. 03-15-00285-CV

IN THE THIRD COURT OF APPEALS

AUSTIN, TEXAS

VOLKSWAGEN GROUP OF AMERICA, INC.

AND AUDI OF AMERICA, INC.

Appellants

vs.

JOHN WALKER III, IN HIS OFFICIAL CAPA CITY AS CHAIRMAN OF

THE TEXAS DEPARTMENT OF MOTOR VEHICLES BOARD, AND THE

HONORABLE MICHAEL J. O'MALLEY AND THE HONORABLE

PENNY A. WILKOV, IN THEIR OFFICIAL CAPACITIES AS

ADMINISTRATIVE LAW JUDGES FOR THE STATE OFFICE OF

ADMINISTRATIVE HEARINGS

Appellees

On Appeal from the 20lst Judicial District Court, Travis County, Texas

Trial Court Cause No. D-1-GN-15-001186

Honorable Amy Clark Meachum, Presiding Judge

AFFIDAVIT OF BILLY M. DONLEY

STATE OF TEXAS §

§

COUNTY OF HARRIS §

1. On this date, Billy M. Donley personally appeared before me, the

undersigned Notary Public, and after being duly sworn stated the following under

oath:

2. My name is Billy M. Donley. I am CUITently over the age of twenty-

one (21 ). I have never been convicted of a felony or a crime of moral turpitude. I

DMSLJBRARYOI :25801724.1

am under no legal disability and I am fully competent to make this Affidavit. I am

lead counsel for Appellants Volkswagen Group of America, Inc. and Audi of

America, Inc. 's (collectively "Audi"). I have personal knowledge of the facts

stated in this affidavit, and they are true and correct.

3. On June 15, 2015, Protestant and Intervenors m the underlying

contested case submitted their reply to Audi's June 10, 2015 letter brief, in which

they stated: "[i]n the interest of expediting this matter and in hopes of getting this

case placed on the Board's agenda for its August meeting, Protestant and

Intervenors respectfully request that your Honors consider the record to be closed

as of the date of this letter so that the PFD rendition and exceptions process may

begin as soon as practicable."

4. Attached hereto as Exhibit "l" is a true and correct copy of Remand

Order No. 15 Closing the Record, entered by Administrative Law Judges Michael

J. O'Malley and Penny A. Wilkov with the State Office of Administrative Hearings

on June 16, 2015 in the underlying contested case styled Budget Leasing, Inc. d/b/a

Audi North Austin and Audi South Austin v. Weitz, et. al. v. Volkswagen Group of

America, Inc., et. al., MVD Docket No. 13-0008-LIC, SOAH Docket No. 608-13-

4599.LIC pending before the Texas Department of Motor Vehicles, Motor Vehicle

Division.

606828207.1 2

~

Signed thi~ day of June, 2015.

SUBSCRIBED and SWORN t efore me on this tJ/*'-day of June, 2015,

to certify which witness my hand and official seal.

Notary Public in and for the

State of Texas

606828207.1 3